Algeria and cryptocurrencies: between the current reality and future developments

Over the past decades, there has been a real revolution in the digital finance sector worldwide, with cryptocurrencies occupying a prominent position in financial markets and the international economy. However, the situation in Algeria is completely different from this general context, as the state adopts a strict stance towards this emerging sector.

Algerian Legal Framework and Current Legislation

Algeria imposes strict legal restrictions on cryptocurrencies, exemplified by the Finance Law issued in 2018. Article 117 of this law explicitly and comprehensively bans dealing with virtual currencies, including buying, selling, using, and holding. Violations of these regulations are subject to severe penalties, including hefty fines and imprisonment. The government justifies this stance on security grounds related to combating the financing of prohibited activities and money laundering and terrorist financing.

Underlying Reasons for the Rejection Stance

The Algerian government relies on several logical justifications to justify its strict policy:

Financial Stability and Price Volatility: Cryptocurrencies like Bitcoin and Ethereum are characterized by sharp price fluctuations, which pose potential risks to the country’s economic stability. Decision-makers believe that allowing trading of these currencies could expose citizens and the state treasury to significant, unpredictable losses.

Security Concerns and Regulation: Algerian authorities face numerous challenges in tracking blockchain-based transactions, opening the door to illegal uses. This reality makes authorities wary of the exploitation of cryptocurrencies in financing prohibited activities.

Maintaining Monetary Sovereignty: Algeria exercises strict control over the Algerian dinar and foreign financial transfers. The government fears that cryptocurrencies could undermine this control and facilitate capital flight outside the country.

Regulatory Gap: Algeria currently lacks advanced legal and regulatory frameworks to regulate the digital currency sector, prompting the government to choose the easier and more cautious path of complete prohibition.

Domestic Pressures and Global Trends

Despite the official ban, government decisions face increasing challenges from multiple fronts:

The growing interest among young people and technology professionals exerts continuous pressure on government policy. These groups seek opportunities to participate in the rapidly evolving digital economy worldwide. Conversely, many countries, especially in the Middle East and North Africa, adopt a regulatory approach rather than outright rejection, which may motivate political reconsideration in Algeria.

Blockchain Applications Beyond Digital Currencies

Algeria has a golden opportunity to utilize blockchain technology in various practical fields without dealing with cryptocurrencies:

Improving financial services can be achieved by applying blockchain technology to accelerate local and international transfer and payment processes and reduce costs. Smart contracts can also be used to manage commercial and legal contracts more efficiently. At the government level, this technology enables secure and transparent documentation of real estate records, identities, and other official documents.

Possible Future Scenarios

Several potential paths can be envisioned for the coming years:

Continuing the Ban Approach: Algeria may maintain its rejection stance, strengthening oversight mechanisms and penalties for violators, amid ongoing security and economic concerns.

Transition to Regulation: As awareness of modern financial technologies develops and local demands increase, Algeria might establish legal frameworks allowing trading under strict supervision by relevant authorities.

Responding to International Pressures: With the global adoption of cryptocurrencies and the digital economy increasing, Algeria may gradually ease its stance and permit limited operations under specific controls.

Issuance of a Sovereign Digital Currency: This middle-ground solution involves the Algerian central bank issuing a digital currency under its direct supervision, combining technological benefits with full control over the financial system.

Summary and Outlook

The current Algerian stance reflects a delicate balance between the need for security and economic protection on one side, and increasing pressures toward technological development on the other. At present, government policy remains cautious and conservative, but rapid developments in the global digital scene may lead to gradual adjustments. Whether through regulated digital currency frameworks or the adoption of sovereign digital currencies, Algeria will face strategic choices that cannot be postponed much in the near future.